Update: VAT and insurance tax treatment of guarantee commitments - BMF circular lettter dated 18 October 2021
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guarantee commitments BMF circular letter update
Germany’s Federal Ministry of Finance (BMF) is once again extending the transitional rule for the treatment of paid guarantee commitments as an insurance service in a circular letter dated 18 October 2021. This gives entrepreneurs more time and flexibility to adapt to the amended Federal Fiscal Court (BFH) case law.
On November 14, 2018 (XI R 16/17), the Federal Fiscal Court (Bundesfinanzhof, BFH) had ruled that the warranty promise of a motor vehicle dealer in return for payment was not a dependent ancillary service to the delivery of the vehicle, but rather an independent insurance service. In a letter dated May 11, 2021, the Federal Ministry of Finance (Bundesfinanzministerium, BMF) had clarified the most important cases of application and, in a letter dated June 18, 2021, added an addendum and amended the transitional regulation. Details can be found here. On October 18, 2021, the BMF amended the transitional rule again to state that the new principles apply to guarantee commitments made after December 31, 2022. However, the new principles can already be applied to guarantee commitments issued before January 1, 2023 without objection.
(Dated: October 19, 2021)
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Thomas Pelzer Director Tax Berlin
Anja Wischermann Senior Manager Frankfurt on the Main
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guarantee commitments BMF circular letter
On 14 November 2018 (XI R 16/17), Germany’s Federal Court of Finance (BFH) ruled that the guarantee commitment of a motor vehicle dealer against payment is not a dependent ancillary service to the supply of the vehicle, but an independent insurance service. In its letter of 11 May 2021, Germany’s Federal Ministry of Finance (BMF) adopts this case law in the VAT Application Decree (UStAE), clarifies...